The Impact Of The Credit Crunch Has Made It More Difficult To Refinance Existing Debt So The Previous Release Valve Is No Longer Available

Category: Finance, Personal Finance.

An increasing number of consumers in Brighton and Hove are developing problems in managing their money, new figures show. The news comes as the proportion of people from Brighton and Hove who are declaring themselves bankrupt has risen by 15 per cent over the course of just three months.

According to research conducted by the government, the Sussex city is currently in the midst of a credit crunch in which residents are finding themselves increasingly unable to afford to make repayments on personal loans, plastic cards and other types of borrowing. Between August and October those filing for voluntary bankruptcy stood at 470, increasing from the 401 recorded from May to July, reports the Argus. Meanwhile, research from auditors KPMG indicates the typical consumer from the south- east filing for bankruptcy owes some 50, 828 pounds via loans, overdrafts and numerous other means of credit. This compares to countrywide figures revealing a five per cent drop in those filing for bankruptcy during the same period of time. Those looking towards individual voluntary arrangements( IVAs) are an average of 48, 666 pounds in the red. However, those living in Eastbourne and Hastings appear to be in a much more capable position to make repayments on personal loans and other such financial demands as bankruptcies in the Sussex towns have fallen by 53 and 30 per cent respectively.

Overall, there are more than 7, 000 bankrupts and 2, 200 IVAs throughout Sussex. Mark Sands, director of restructuring for the financial services firm, told the publication: "With average debt levels as high as this, interest rate rises and other strains on the family budget, many individuals are likely to see their finances severely affected. As a result the pressure on the over- indebted continues to grow" . "It is unsurprising that we are continuing to see such high levels of people choosing personal insolvency as the solution to their problems. The impact of the credit crunch has made it more difficult to refinance existing debt so the previous release valve is no longer available. Despite the national fall in personal insolvencies, anyone taking comfort in this slight drop is in for a rude awakening. " He pointed out that despite the recent fall noted in national insolvency figures, such a trend is" only a temporary respite from long- term increases to record levels" as people may well struggle even more to manage their money- whether this be through paying utility bills and rent costs or meeting demands for payment on a secured loan. As a result of getting such a loan, borrowers could find themselves with more disposable income at the end of each month as they can pay off credit cards and other loans that they may have taken out quickly.

However, those people who find that they are struggling to handle their finances, but do not wish to incur the damage to their credit report that filing for insolvency can bring, may wish to consider taking out a debt consolidation loan. Earlier this year, head of personal, David Kuo finance at the Motley Fool, reported that the impact of the credit crunch could see more consumers develop problems in managing their money.

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